Securities and Exchange Commission v. Charles Richard Homa et al., U.S. District Court for the Southern District of New York, Civil Action No. 99-Civ-10557 (S.D. N.Y.. October 15, 1999)

On October 15, 1999, the Securities and Exchange Commission filed a Complaint in Federal District Court in New York, New York, to halt a massive Ponzi Scheme that has allegedly raised approximately $300 million over several years. On the same day, Judge David N. Edelstein of the U.S. District Court for the Southern District of New York issued a Temporary Restraining Order, which included a prohibition against violations of federal securities laws and an asset freeze, against the defendants, including Richard Homa, a resident of Atlanta, Georgia, Michael Gause of Fort Lauderdale, Florida, Bill J. Short, II, a resident of Marco Island, Florida, Jimmy B. Roof, a resident of West Columbia, South Carolina, Robert C. Ellenburg, a resident of Columbia, South Carolina, Steven Shane Nichols, a resident of Aurora, Colorado, Philip A. Sharpton, a resident of Stone Mountain, Georgia, Charles Edward Dickerson, a resident of Franklin, Tennessee and their related entities. The Complaint alleges that Gause and Homa stood at the top of a multi-layered marketing scheme that sold notes and bonds as part of a massive Ponzi scheme that may have raised as much as $300 million since its inception . The Complaint further alleges that the defendants violated the federal securities laws by making false claims that the money they were raising would be used to fund loans to companies engaged in the car title loan industry and the payday loan industry. The Complaint alleges that many of the Defendants were told that the funds would be loaned to Cash 4 Titles, a company operated by Homa. The Complaint alleges that only a small fraction of the money was used for its intended purpose. Instead, the Complaint alleges that the defendants, after transferring the money to Cayman Islands accounts, used the money to pay existing investors, pay commissions and pay personal expenses.

The Complaint alleges that the defendants violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Complaint also alleges that defendants who sold the notes and bonds acted as unregistered broker-dealers in violation of Section 15(a) of the Exchange Act and also committed violations of Section 15(c) of the Exchange Act and Rule 15c1-2 thereunder. As part of the relief requested, Judge Edelstein issued a temporary restraining order against the defendants prohibiting them from any further violations of the federal securities laws and ordered an asset freeze. Judge Edelstein also ordered a hearing for Monday October 18, 1999 at 11:00 a.m. to determine whether to continue the Temporary Restaining Order.

On October 15, 1999, Michael Gause was arrested for his participation in the actions described above. The Commission would like to thank the United States Attorneys Office for the Southern District of New York for their assistance in this matter.